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Growing ARPU

By Telco2 min read

Some fascinating research has appeared on my desk (well, actually on my screen, and that sits on my desk) regarding ARPUs in the US, which are bucking the trend and have started rising.

This is fantastic news for service providers and illustrates there is light at the end of the tunnel. For years, phone call rates continued to slide down and down to a commodity that costs almost nothing. Every now and then we had a clean-out of the pricing “bottom dwellers”, and that helped ease the downward pressure on rates. In addition, the pricing trend has been partially offset by continued growth in call volumes. But in present times, how can anyone make a decent living selling calls for just a few cents per minute?

My answer, as usual, is by deception. Oops, I mean by bundling.

In addition to the stickiness that bundling induces in customers, what it does from a pricing perspective is it boosts ARPUs. The customer is getting more from you, but is paying more as well. And very often, the structrure of bundles includes paying for capacity that you may not ever use. This is a key margin booster for vendors.

Bundling decommoditizes the consituent products by focussing on a headline that includes X, Y, and Z. In doing so, it doesn’t need to tell you what the underlying rates for each of the products is. This puts a very simple proposition to the customer, and hides silly things like details. Simple good. And as a vendor, the last thing you want is to be selling a commodity.

Are you bundling yet?

This was also posted at [Billing Bureau].

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